Film Subsidies

Pennsylvania Subsidized Creed II With $16 Million in Tax Breaks, Even Though It Mostly Takes Place in California

The movie moves the Rocky franchise from Philadelphia to Los Angeles. So it's an apt metaphor for Pennsylvania's film subsidy program.

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John Nacion/starmaxinc.com/Newscom

Pennsylvania taxpayers helped subsidize the filming of Creed II with $16 million in tax credits, despite the fact that the movie relocates its main characters (and perhaps the future of the long-running, iconic Rocky series) from Philadelphia to Los Angeles.

It's an apt metaphor for film tax credit programs in general—which are sold as a way to create local jobs in the movie business or as a way to get a state's top tourist destinations featured on the big screen—but mostly end up benefitting Hollywood production companies.

Creed II, released earlier this month, is the sequel to 2015's Creed, a spin-off of the Rocky series that sees a now-aged Rocky Balboa (Sylvester Stallone) training up-and-coming boxer Adonis Creed (Michael B. Jordan). Adonis is, of course, the son of Apollo Creed, the antagonist from the first two Rocky films who later becomes a close friend of Rocky's before being killed in Rocky IV. The second Creed film pits Adonis against the son of Ivan Drago, the Russian heavyweight who killed his father—yeah, there's a lot of father-son stuff happening.

Those who watched the first Creed may recall that Adonis hailed from Los Angeles. He relocated to Philadelphia to train with Balboa and to find love—and, let's be honest, so the movie could feature yet another training montage featuring Philadelphia icons like the art museum steps made famous by the series' original entry.

This time around (minor spoilers follow), Adonis and his Philadelphia-born fiance Bianca Taylor (Tessa Thompson) decide to return to the West Coast. After a few early scenes in and around Philadelphia, much of the the rest of the movie in set in California (except for some scenes set in eastern Europe). Creed and Taylor have a luxury L.A. apartment, the mandatory training montage takes place in the middle of the California desert, and even Rocky himself is eventually convinced to decamp from Philly to L.A.

The move makes sense, for the story. "He came to Philly with a purpose, and sought out Rocky, and while we were mindful of that tradition of making Philadelphia a character in the films, we also wanted to do justice to Adonis by making the story follow his true path as well," Jordan told The Philadelphia Inquirer earlier this month. But as a $16 million ad for Pennsylvania, it fails.

If Pennsylvanians aren't unhappy about the decision to take Rocky out of Philly, maybe they should be unhappy about having to help pay for it. As the Inquirer's Laura McCrystal explains, Creed II got more than $16 million in tax breaks because the film met the requirement of having at least 60 percent of it's production costs incurred in Pennsylvania. That's really the only requirement, and it doesn't mean that 60 percent of the movie has to be set in Pennsylvania—the tax credit functions as a 25 percent rebate on practically any expense connected to filming in Pennsylvania, from catering lunch for production crews to buying camera equipment.

Pennsylvania hands out $60 million in tax credits each year to lure movie and television productions to the Keystone State. Some state lawmakers are pushing to remove that annual cap, McCrystal reports, so the state could soon be giving away even more.

Since creating the tax credit program under Gov. Ed Rendell in 2004, Pennsylvania has subsidized films that turned into major hits (Silver Linings Playbook got $4.4 million) and laughable flops (After Earth, Will Smith's disaster that was supposed to launch his son's career, got more than $20.4 million). The list includes critically-acclaimed films (Foxcatcher, a 2015 Oscar nominee, got $5.4 million) and movies that you'd only see if someone was paying you to do it (like M. Night Shyamalan's The Last Airbender, a movie probably best remembered for the controversy surrounding Shyamalan's decision to cast white actors as Japanese characters, which got $36 million in tax credits from the state).

Lots of states have similar programs, of course, but the incentives are basic crony capitalism with little economic benefit.

A 2016 study published in the American Review of Public Administration concluded that neither transferrable nor refundable film tax credit programs "affected gross state product or motion picture industry concentration. Incentive spending also had no influence." In Virginia, a 2017 state legislative study found that film tax credits had "a negligible benefit to the Virginia economy" and returned about 20 cents on the dollar.

"The film industry claims that they create jobs for local residents, but the most serious study of this issue found that out-of-state specialists—actors, writers, cinematographers, and so on—reap a disproportionate share of the benefits," wrote Robert Tannenwald, a professor of economics at Brandeis University, in a 2011 report for Center for Budget and Policy Priorities, a progressive think tank where he was a senior fellow at the time. "Residents get relatively low-paying jobs that disappear once a shoot is finished and the producer leaves town."

Like Adonis Creed returning to L.A., most of the money from Pennsylvania's film tax credit program also ends up out of state. In an exhaustive report published in 2016, Pittsburgh-based watchdog Public Source found that 99 percent of all film tax credits end up being transferred to "companies that have nothing to do with film or TV," essentially turning the film tax credit into "a backdoor tax break for some of the largest corporations and utilities operating in Pennsylvania."

In 2014, Pennsylvania's auditor general dinged the state agency that oversees the film tax credit program for not having clear metrics for evaluating the program's cost effectiveness, noting that the agency could not provide "evidence that metrics even exist."

But even by those low standards, making your residents subsidize a movie about a character who gets rich and successful in Philadelphia and then decides to move away seems to send an interesting message. Don't blame Adonis Creed for Pennsylvania's declining population and the decreased political clout that comes with it. Blame the people running the state who still think film tax credits are a worthwhile use of public resources.

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  1. They moved the character from Scranton? What a gyp.

  2. Pretty funny. Hollywood screwing over someone besides California, and so blatantly. Way to rub their noses in it.

  3. Bad news for Georgia’s similarly subsidized regime: Hollywood has been mumbling about boycotts because of the stolen governor’s election! Take that, Kemp! That will show you, Georgia taxpayers!

    1. Tax credits are NOT subsidies.

      The walking Dead set is already in Senoia, Georgia, so that wont be going anywhere soon.

      Pinewood studios in Fayetteville GA

      Three Rings Studio in Covington GA

      Blackhall Studios
      Tyler Perry Studios
      EUE/Screen Gems Studios
      Eagle Rock Studios Atlanta

      Yeah, Georgia used Hollywood money to create an environment for anyone to create movies that will last far into the future. Georgia is cheap, low regulations overall, great locales, and close to most other desired locations.

      1. Ironic is that Third Rail Studios took over an old GM plant in Doraville, Georgia.

      2. Yes they are. Look up what a refundable tax credit is.

        1. Read the definition of subsidy. Its quite simple.

  4. I have to be that annoying guy…

    The Last Airbender’s characters aren’t Japanese any more than they are white. They’re from a fictional universe where Japan has never existed, and there’s no such things as Asians, white people, etc. This is why all the controversy, from any side, about the races of actors playing those characters was pointless.

    But, yeah, tax breaks for dumb things are dumb.

    1. That one was a real head scratcher! Not only does the story not even take place on Earth, the real life franchise is entirely American and has nothing whatsoever to do with Japan! I know they do use some Chinese (or Chinese-style; I cannot read them) characters on the show for writing, and a lot of their aesthetic, but there is much inspired by real-life traditional civilizations from all over the world. Japan is definitely not the prevalent influence. Very weird comment.

      1. This, exactly.

        1) The TV series characters not Japanese in-universe
        2) The cultures of the characters were not based on Japan*
        3) The voice actors of the characters were not Japanese
        4) The series creators were not Japanese
        5) The series directors were not Japanese
        6) The series producers were not Japanese
        7) The series writers were not Japanese
        8) The series animation houses were not Japanese (they were Korean, just like for The Simpsons)
        9) The martial arts depictions were not based on Japanese martial arts (they were based on Chinese martial arts)
        10) The calligrapher brought in to set the visual style was not Japanese (he’s a Chinese-born American)

        *It is true that early drafts of the Fire Nation were based on Japan, before they deliberately changed it to avoid sending an “evil aggressor Japan conquering all they can” vibe.

        1. Usually people say that the The Last Airbender film should have featured Chinese actors (or just Asian, in general) because of all the Chinese cultural influences in the cartoon (martial arts, aesthetics, language, mythology, etc.). But one could be forgiven for assuming they’re Japanese influences, given that the cartoon uses a Japanese anime-influenced animation style, and that Japanese anime has had much more cultural impact than most Chinese art in America. But, my argument still stands. The cartoon features characters of no particular earthly race, as the show doesn’t take place on Earth, so complaining about racial casting was pretty pointless.

          1. One does not simply forgive the SJW hordes.

    2. I have to be that annoying guy…

      Good on you because I stumbled over the line, “we also wanted to do justice to Adonis by making the story follow his true path as well.” They do realize that he’s a rather original fictional character owed no justice and entirely without a ‘true path’ in any/all sense of the words, right?

      Am I wrong? Is there a historical literary or based-on-a-true-story Adonis Creed that they’re trying to emulate?

  5. Tax credits are NOT subsidies.

    sub?si?dy
    /?s?bs?d?/
    noun: subsidy; plural noun: subsidies
    1. a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

    Tax credits are not a sum of money.

    Tax credits reduce your taxable income on paper.

    1. What’s the difference between a direct payment and a reduced theft? Either way is a subsidy. Any other description is quibbling of the worst political sort.

      If the government sends me a subsidy of $1000 after I sent them a tax payment of $2000, how is that different from giving me a $1000 tax credit and I only send them a tax payment of $1000?

      1. Taxes are not always theft, if they are voluntary.

        I voluntarily pay my taxes but complain that they are too high.

        Words have meanings.

        1. Are you saying subsidies and tax credits cannot be refused?

          To call any kind of taxation “voluntary” is a corruption of plain language.

          1. If I didnt want to pay taxes, I wouldnt. I am voluntarily paying taxes. I pay far less than most because I dont pay into social security.

            1. Sure, and mugging victims voluntarily give up their wallet.

      2. If the government sends me a subsidy of $1000 after I sent them a tax payment of $2000, how is that different from giving me a $1000 tax credit and I only send them a tax payment of $1000?

        Do we just assume you have $2000 or no?

        1. Why assume I even have enough to pay the taxes? After all, they are voluntary, and I can refuse to pay them. I’ll even get free room and board for my trouble.

    2. “Not giving is taking, and not taking is giving!”

      -Professional Fake Libertarian Eric Boehmer

  6. We finally have a movie with a black lead who isn’t getting shot at by the police for no good reason, and, um, Reason is busy bashing it. I know their agenda includes promoting violence against communities of color, but this is a new low. Of course, what more do you expect from a publication that employs not-so-subtle dog whistles against underprivileged communities while hiding behind buzzwords like economic liberty and freedom of speech?

    Face facts, you bunch of right-wing troglodytes. The future of America won’t be white or libertarian. Diversity and love will always triumph over your brand of old-style bigotry, which will be confined to the dustbin of history once Mueller is through with you.

    1. From now on it’s just new-style bigotry

    2. I know I shouldn’t feed the troll, but it takes an especially low piece of intelligence to read this as trashing the film.

  7. Georgia is making money hand over fist.

    Thanks for giving us money, non-Georgians.

  8. That California desert montage is mostly southern New Mexico. My buddy was an extra. More tax brakes.

  9. Totally disagree. M. Night Shyamalan’s “Last Airbender” is best remembered for UK audiences laughing uproariously every time a character said “He’s a bender.”

  10. By this reasoning, Reason is insisting the U.S. government should subsidize internet thots.

    1. The logical path for Reason’s ridiculous statements is that the tax cuts are a subsidy.

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